2015 (3) TMI 622 - HC - Companies Law

Appeal against order of Debt Recovery Appellate Tribunal(DRAT) - Confirmation of the highest bid - Interest on refund - Held that - The above paragraph is a complete answer to the contention of the petitioner that the confirmation of sale had already taken place or the DRT had directed the bank to confirm the petitioner s bid. The said paragraph lucidly and in clear terms records that the bank was at liberty to precede with regard to confirmation of sale as per law. No affirmative or specific direction was made on the application filed by the petitioner that the bid should be confirmed. This establishes and proves that till the said date i.e. 29.1.2013, there was no confirmation of the bid. Thereafter also, the bank did not confirm or accept the bid of the petitioner. There could be some merit in the contention of the petitioner that the letter dated 19th February, 2013 rejecting and not confirming their bid was sent/dispatched on 22nd February, 2013 i.e. after the sale certificate was issued on 20th February, 2013 in favour of the fourth respondent, but this reason or ground is not sufficient and a good cause to reject or negate the sale certificate and to issue a direction for confirming the bid given by the petitioner. The stand of the bank that they had not confirmed or accepted the bid of the petitioner is correct. Thus no concluded and binding contract existed, compelling the bank to execute the sale certificate or deed in favour of the petitioner. The bank could not have rejected the petitioner s bid without receiving payment from the fourth respondent. It was natural for them to await payment from the fourth respondent, before rejecting the petitioner s bid and inform them. The highest bidder cannot have any vested right to claim confirmation of his bid or quotation. Of course, if the bid is wrongly rejected in a capricious and arbitrary manner, the allegation can be examined but this is not the position in the present case. These decisions of the High Court of Delhi have to be read in light and terms of the decision of the Supreme Court in Mathew Varghese 2015 (1) TMI 461 - SUPREME COURT , which specifically interprets section 13 of the Act and the applicable Rules. The difference in price between the bid of the petitioner and the price paid by the fourth respondent is too startling and staggering. As already noted, the petitioner refused to participate in inter-se bidding. The entire submission of the petitioner is that their bid should be accepted as the transaction was concluded and had become binding, is without merit and has to be rejected. It has been urged before us that the plea with regard to interest was raised before the DRAT, but has not been dealt with in the impugned order dated 10th October, 2014. We do not find any discussion on the said aspect in the impugned order. An order of remit is accordingly passed on the question whether the petitioner is entitled to interest, and if so, at what rate and for which period.To cut short delay parties are directed to appear before the DRAT on 22nd December, 2014, when a date of hearing will be fixed.- Writ petition dismissed.

Issues Involved:
1. Confirmation and acceptance of the highest bid.
2. Compliance with the Debt Recovery Tribunal (DRT) stipulations.
3. Validity and implications of the sale certificate issued to a third party.
4. Applicability of Section 13(1) of the SARFAESI Act and related rules.
5. Entitlement to interest on the refunded bid amount.

Issue-Wise Analysis:

1. Confirmation and Acceptance of the Highest Bid:
The petitioner, M/s Goldkist Mobile Academy Pvt. Ltd., argued that the letter dated 11th July 2011 from the bank, which declared them as the highest bidder, should be treated as confirmation of the bid. However, the court found that this letter merely informed the petitioner of their status as the highest bidder and required compliance with the terms of the notice inviting bids. It was not a confirmation or acceptance of the bid that would create a binding contract. The court emphasized that the bid had not been confirmed or accepted by the bank, and thus no binding contract was formed.

2. Compliance with the Debt Recovery Tribunal (DRT) Stipulations:
The court noted that the DRT had issued an interim order on 8th July 2011, allowing the bank to proceed with the auction but requiring DRT approval for bid confirmation. The petitioner was aware of this stipulation and had even filed applications seeking confirmation of the sale. The DRT's order dated 29th January 2013 dismissed the borrower and guarantor's objections and allowed the bank to proceed with the sale confirmation as per law. This indicated that the bid had not been confirmed as of that date.

3. Validity and Implications of the Sale Certificate Issued to a Third Party:
Post the DRT's order, the borrower found a purchaser, M/s K.D. Landhome Pvt. Ltd., who offered a higher price of Rs. 28 crores. The bank accepted this offer and issued a sale certificate on 20th February 2013. The petitioner claimed they were not informed about this higher offer and only learned of the rejection of their bid on 25th February 2013. The court found that the bank's decision to accept the higher offer was justified, as no binding contract existed with the petitioner. The substantial price difference justified the bank's decision to accept the higher bid.

4. Applicability of Section 13(1) of the SARFAESI Act and Related Rules:
The petitioner argued that under Section 13(1) of the SARFAESI Act and Rules 8 and 9, their bid should have been accepted. However, the court referred to the Supreme Court's decision in Mathew Varghese vs. M. Amritha Kumar, which clarified that the borrower's right to redemption continues until the sale is completed by registration. Since the petitioner's bid was not confirmed, the borrower retained the right to find another purchaser. The court also noted that auction terms allowed the highest bid to be subject to confirmation by the authorized officer, and the bank was not bound to accept the highest bid if a higher offer was subsequently received.

5. Entitlement to Interest on the Refunded Bid Amount:
The DRT had directed that the petitioner was entitled to interest on the deposited amount from the date of deposit until the bank returned the money, except for the period when the petitioner refused to accept the demand draft. The DRAT did not address this issue in its order. The High Court remanded the matter back to the DRAT to determine whether the petitioner was entitled to interest, the applicable rate, and the period for which interest should be paid.

Conclusion:
The writ petition was dismissed except for the remand on the question of interest. The court directed the parties to appear before the DRAT to resolve the interest issue. No costs were imposed on the petitioner due to the remand.

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